THE REGIONAL RURAL BANKS ACT, 1976 
_________ 
ARRANGEMENT OF SECTIONS 
__________ 
CHAPTER I 
PRELIMINARY 

SECTIONS 

1. Short title, extent and commencement. 
2. Definitions. 

CHAPTER II 
INCORPORATION AND CAPITAL OF REGIONAL RURAL BANKS 

3. Establishment and incorporation of Regional Rural Banks. 
4. Offices and agencies. 
5. Authorised capital. 
6. Issued capital. 
7. Shares to be approved securities. 

CHAPTER III 
MANAGEMENT 

8. Management. 
9. Board of directors. 
10. Term of office of director. 
11. Chairman. 
12. Disqualifications. 
13. Vacation of the seat of directors. 
14. Meetings of Board. 
15. Committees of Board. 
16. Fees and allowances of directors and members of committees. 
17. Staff of Regional Rural Banks. 

CHAPTER IV 
BUSINESS OF A REGIONAL RURAL BANK 

18. Business which a Regional Rural Bank may transact. 
CHAPTER V 
ACCOUNTS AND AUDIT 

19. Closure of accounts. 
20. Annual report to be furnished to the shareholders. 
21. Disposal of profits. 
22.  Regional  Rural  Bank  to  be  deemed  to  be  a  co-operative  society  for  purpose  of  the  Income-tax 

Act, 1961. 

23. Interest-tax not payable. 

CHAPTER VA 
AMALGAMATION OF REGIONAL RURAL BANKS 

23A. Amalgamation of Regional Rural Banks. 
23B. Notification under section 23A to be sufficient notice to concerned parties. 
23C. Cessation of business of transferor Regional Rural Banks. 

1 

SECTIONS 

23D. Liquidation of Regional Rural Banks. 

CHAPTER VI 

MISCELLANEOUS 

24. Power of Central Government to give directions. 
24A. Inspection, audit and scrutiny by the Sponsor Bank. 
25. Obligations as to fidelity and secrecy. 
26. Bar to liquidation of Regional Rural Bank. 
27. Defects in appointment or constitution not to invalidate acts or proceedings. 
28. Indemnity of directors, etc. 
29. Power to make rules. 
30. Power to make regulations. 
31. Removal of difficulties. 
32. Act to override the provisions of other laws. 

CHAPTER VII. (Repealed) 

THE SCHEDULE.

2 

THE REGIONAL RURAL BANKS ACT, 1976 

ACT NO. 21 OF 1976 

An  Act  to  provide  for  the  incorporation,  regulation  and  winding  up  of  Regional  Rural  Banks 
with a view to developing the rural economy by providing, for the purpose of development of 
agriculture, trade, commerce, industry and other productive activities in the rural areas, credit 
and  other  facilities,  particularly  to  the  small  and  marginal  farmers,  agricultural  labourers, 
artisans and small entrepreneurs, and for matters connected therewith and incidental thereto. 

BE it enacted by Parliament in the Twenty-seventh Year of the Republic of India as follows:— 

[9th February, 1976.] 

CHAPTER I 

PRELIMINARY 

1. Short title, extent and commencement.—(1) This Act may be called the Regional Rural Banks 

Act, 1976. 

(2) It extends to the whole of India. 

(3) It shall be deemed to have come into force on the 26th day of September, 1975. 

2. Definitions.—In this Act, unless the context otherwise requires,— 

(a) “Board”, in relation to a Regional Rural Bank, means the Board of directors of that Regional 

Rural Bank; 

(b)  “Chairman”,  in  relation  to  a  Regional  Rural  Bank,  means  the  individual  appointed  or                     

re-appointed under sub-section (1) of section 11 as the Chairman of that bank; 

(c) “director”, in relation to a Regional Rural Bank, means a member of the Board of that bank; 
1[(ca)  “National  Bank”  means  the  National  Bank  for  Agriculture  and  Rural  Development 
established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 
(61 of 1981);] 

(d)  “notified  area”  means  the  local  limits,  specified  under  sub-section  (1)  of  section  3,  within 

which a Regional Rural Bank shall operate; 

(e) “prescribed” means prescribed by rules made under this Act; 

(f)  “Regional  Rural  Bank”  means  a  Regional  Rural  Bank  established  under  sub-section  (1)  of 

section 3; 

(g) “Sponsor Bank”, in relation to a Regional Rural Bank, means a bank by which such Regional 

Rural Bank has been sponsored; 

(h) “State Government” means,— 

(i)  in  relation  to  a  Regional  Rural  Bank  established  in  a  Union  territory,  the  Central 

Government; 

(ii) in relation to a Regional Rural Bank established in a State, the Government of that State; 

(i) words and expressions used herein and not defined but defined in the Reserve Bank of India 

Act, 1934 (2 of 1934), shall have the meanings respectively assigned to them in that Act; 

(j) words and expressions used herein and not defined either in this Act or in the Reserve Bank of 
India Act, 1934 (2 of 1934), but defined in the Banking Regulation Act, 1949 (10 of 1949), shall have 
the meanings respectively assigned to them in the Banking Regulation Act, 1949 (10 of 1949). 

1. Ins. by Act 1 of 1988, s. 2 (w.e.f. 28-9-1988).  

3 

                                                           
CHAPTER II 
INCORPORATION AND CAPITAL OF REGIONAL RURAL BANKS 

3. Establishment and incorporation of Regional Rural Banks.—(1) The Central Government may, 
if requested so  to  do  by  a Sponsor  Bank,  by  notification in the  Official  Gazette,  establish  in  a  State  or 
Union territory, one or more Regional Rural Banks with such name as may be specified in the notification 
and may, by the said or subsequent notification, specify the local limits within which each Regional Rural 
Bank shall operate. 

(2) Every Regional Rural Bank shall be a body corporate with perpetual succession and a common 
seal  with  power,  subject  to  the  provisions  of  this  Act,  to  acquire,  hold  and  dispose  of  property  and  to 
contract and may sue and be sued in its name. 

1[(3) It shall be the duty of the Sponsor Bank to aid and assist the Regional Rural Bank, sponsored by 

it, by— 

(a) subscribing to the share capital of such Regional Rural Bank; 
(b) training personnel of such Regional Rural Bank; and 
(c) providing such managerial and financial assistance to such Regional Rural Bank 2***, as may 

be mutually agreed upon between the Sponsor Bank and the Regional Rural Bank: 
3* 
4. Offices and agencies.—(1) A Regional Rural Bank shall have its head office at such place in the 
notified  area  as  the  Central  Government  may,  after  consultation  with  the  4[National  Bank]  and  the 
Sponsor Bank, specify by notification in the Official Gazette. 

*] 

* 

* 

* 

(2) A Regional Rural Bank may, if it is of opinion that it is necessary so to do, establish its branches 

or agencies at any place in the notified area. 

5. Authorised capital.—The authorised capital of each Regional Rural Bank shall be 5[two thousand 

crore of rupees, divided into two hundred crore of fully paid-up shares of ten rupees each]: 

Provided  that  the  Central  Government  may,  after  consultation  with  the  6[National  Bank]  and  the 
Sponsor Bank, increase or reduce such authorised capital; so, however, that the authorised capital shall 
not be reduced below  7[one crore of rupees, and the shares shall be, in all cases, fully paid-up shares of 
ten rupees each]. 

6. Issued capital.—8[(1) The issued capital of each Regional Rural Bank shall, in the first instance, 
be such as may be fixed by the Central Government in this behalf, but it shall in no case be less than 9[one 
9[one crore of rupees].] 

(2)  Of  the  capital  issued  by  a  Regional  Rural  Bank  under  sub-section  (1),  fifty  per  cent.  shall                        

be  subscribed  by  the  Central  Government;  fifteen  per  cent.  by  the  concerned  State  Government  and    
thirty-five per cent. by the Sponsor Bank. 

10[Provided that in case the Regional Rural Bank raises its capital from sources other than the Central 
Government or the State Government or the Sponsor Bank, the shareholding of the Central Government 
and the Sponsor Bank shall not be less than fifty-one per cent.: 

Provided  further  that  the  Central  Government  shall  consult  the  concerned  State  Government  if  the 
level  of  shareholding  in  the  Regional  Rural  Bank  of  such  State  Government  is  reduced  below  fifteen      
per cent.] 

1. Subs. by Act 1 of 1988, s. 3, for sub-section (3) (w.e.f. 28-9-1988).  
2. The words “during the first five years of its functioning” omitted by Act 14 of 2015, s. 2 (w.e.f. 4-2-2016).  
3. The proviso omitted by s. 2, ibid. (w.e.f. 4-2-12016).  
4. Subs. by Act 1 of 1988, s. 4, for “Reserve Bank” (w.e.f. 28-9-1988).  
5. Subs. by Act 14 of 2015, s. 3, for  “five crores of rupees divided into five lakhs of fully paid-up shares of one hundred 

rupees each” (w.e.f. 4-2-2016).  

6. Subs. by Act 1 of 1988, s. 5, for “Reserve Bank” (w.e.f. 28-9-1988).  
7. Subs. by Act 14 of 2015, s. 3, for “twenty-five lakhs of rupees, and the shares shall be, in all cases, fully paid-up shares of 

one hundred rupees each” (w.e.f. 4-2-2016).  

8. Subs. by Act 1 of 1988, s. 6, for sub-section (1) (w.e.f. 28-9-1988). 
9. Subs. by Act 14 of 2015, s. 4, for “twenty-five lakhs of rupees or exceed one crore of rupees” (w.e.f. 4-2-2016).   
10. Ins. by s. 4, ibid. (w.e.f. 4-2-2016).  

4 

 
 
 
 
 
 
 
 
                                                           
1[(2A)  The  Central  Government  may,  in  consultation  with  the  Sponsor  Bank  and  the  State 
Government, by notification, either raise or reduce the limit of shareholding of the Central Government, 
the State Government or the Sponsor Bank specified in sub-section (2): 

Provided that the Central Government shall consult the concerned State Government before reducing 

the limit of shareholding of such State Government.] 

(3)  The  Board  may,  after  consultation  with  the  2[National  Bank],  the  concerned  State  Government 
and the Sponsor Bank and with the prior approval of the Central Government, from time to time, increase 
the issued capital of the Regional Rural Bank; and, where additional capital is issued, such capital shall 
also  be  subscribed  in  the  same  proportion  as  is  specified  in  sub-section  (2)  1[or,  as  the  case  may  be, 
notified by the Central Government under sub-section (2A)]. 

7.  Shares to  be  approved  securities.—Notwithstanding  anything  contained in the  Acts  hereinafter 
mentioned in this section, the shares of a Regional Rural Bank shall be deemed to be included among the 
securities enumerated in section 20 of the Indian Trusts Act, 1882 (2 of 1882), and shall also be deemed 
to be approved securities for the purposes of the Banking Regulation Act, 1949 (10 of 1949). 

CHAPTER III 

MANAGEMENT 

8.  Management.—(1)  Subject  to  the  provisions  of  this  Act,  the  general  superintendence,  direction 
and management of the affairs and business of a Regional Rural Bank shall vest in a Board of directors 
who may exercise all the powers and discharge all the functions which may be exercised or discharged by 
the Regional Rural Bank. 

(2) In discharging its functions, the Board shall act on business principles and shall have due regard to 

public interest. 

9.  Board  of  directors.—(1)  The  Board  of  directors  shall  consist  of  the  Chairman  appointed  under 

sub-section (1) of section 11, and the following other members, namely:— 

 3[(a) two directors, who are not officers of the Central Government, State Government, Reserve 

Bank, National Bank, Sponsor Bank or any other bank, to be nominated by the Central Government; 

4[Provided that no person shall be nominated as a director, if he is already a director on the Board 

Board of any other Regional Rural Bank;] 

(b) one director, who is an officer of the Reserve Bank, to be nominated by that Bank; 

(c) one director, who is an officer of the National Bank, to be nominated by that Bank; 

(d) two directors, who are officers of the Sponsor Bank, to be nominated by that Bank; and 

(e) two directors, who are officers of the concerned State Government, to be nominated by that 

Government:] 

4[(f) such number of directors elected by the shareholders other than the directors nominated by 
the  Central  Government,  the  State  Government,  the  Sponsor  Bank  and  other  institutions  owned  or 
controlled  by  the  Central  Government  or  the  State  Government,  whose  names  are  entered  in  the 
register of shareholders of the Regional Rural Bank at least ninety days before the date of the meeting 
in which the election of directors takes place on the following basis, namely:— 

(i) where the total amount of equity share capital issued to such shareholders is ten per cent. 

or less of the total issued equity capital, one director shall be elected from such shareholders; 

(ii) where the total amount of equity share capital issued to such shareholders is more than ten 
per cent. but less than twenty-five per cent. of the total issued equity capital, two directors shall 
be elected from the shareholders including the shareholders referred to in sub-clause (i); 

1. Ins. by Act 14 of 2015, s. 4 (w.e.f. 4-2-2016).  
2. Subs. by Act 1 of 1988, s. 6, for “Reserve Bank” (w.e.f. 28-9-1988).  
3. Subs. by s. 7, ibid., for clauses (a), (b) and (c) (w.e.f. 28-9-1988). 
4. Ins. by Act 14 of 2015, s. 5 (w.e.f. 4-2-2016).  

5 

                                                           
(iii) where the total amount of equity share capital issued to such shareholders is twenty-five 
per  cent.  or  more  of  the  total  issued  equity  capital,  three  directors  shall  be  elected  from  the 
shareholders including shareholders referred to in sub-clauses (i) and (ii).] 

 (2) The Central Government may increase the number of members of the Board; so, however, that 
the number of directors does not exceed fifteen in the aggregate and also prescribe the manner in which 
the additional number may be filled in. 

1[(3)  The  Central  Government  may  appoint  an  officer  of  the  Central  Government  on  the  Board  of 
Regional Rural Banks, if it considers necessary for the purposes of effective functioning of the Regional 
Rural Banks.] 

2[10.  Term  of  office  of  director.—A  director  nominated  under  clause  (a)  of  sub-section  (1)  of 
section  9  shall  hold  office  during  the  pleasure  of  the  Central  Government  and  for  such  term,  not 
exceeding  three  years,  from  the  date  on  which  he  assumes  his  office,  as  the  Central  Government  may 
specify at the time of his nomination and shall be eligible for renomination: 

Provided  that  no  such  director  shall  hold  office  either  continuously  or  intermittently  for  a  period 

exceeding six years.] 

11.  Chairman.—(1)  3[The  Sponsor  Bank]  shall  appoint  an  individual  to  be  the  Chairman  of  a 
Regional  Rural  Bank  and specify  the  period,  not  exceeding  five  years,  for  which  such  individual shall, 
subject to the provisions of sub-section (4), hold office as the Chairman: 

4[Provided that no appointment of such an individual shall be made,— 

(a)  if  such  an  individual  is  an  officer  of  the  Sponsor  Bank,  except  after  consultation  with  the 

National Bank; 

(b) in any other case, except with the prior approval of the Central Government.] 

5[(1A) Notwithstanding anything contained in sub-section (1),— 

(a) the Sponsor Bank shall have the right to terminate the term of office of the Chairman at any 

time before the expiry of the period specified in sub-section (1): 

Provided that no such termination shall be made,— 

(a)  if  the  Chairman  is  an  officer  of  the  Sponsor  Bank,  except  after  consultation  with  the 

National Bank; and 

(b) in any other case, except with the prior approval of the Central Government: 

Provided  further  that  where  the  Chairman  is  not  an  officer  of  the  Central  Government,  State 
Government, Reserve Bank, National Bank, Sponsor Bank or any other bank, he shall be given notice 
of not less than three months in writing or three months’ salary and allowances in lieu of such notice; 
and 

(b)  the  Chairman  shall  have  the  right  to  resign  his  office  at  any  time  before  the  expiry  of  the 
period specified in sub-section (1) by giving to the Sponsor Bank, notice of not less than three months 
in writing.] 

(2) The individual, appointed as a Chairman under sub-section (1), shall, on the expiry of the period 

specified under that sub-section, be eligible for re-appointment. 

(3)  The  Chairman  shall  devote  his  whole  time  to  the  affairs  of  the  Regional  Rural  Bank  and  shall 
have, subject to the superintendence, control and direction of the Board, the management of the whole of 
the affairs of the Regional Rural Bank. 

1. Ins. by Act 14 of 2015, s. 5 (w.e.f. 4-2-2016).  
2. Subs. by s. 6, ibid., for section 10 (w.e.f. 4-2-2016).  
3. Subs. by Act 1 of 1988, s. 8, for “The Central Government” (w.e.f. 28-9-1988). 
4. Proviso ins. by s. 8, ibid. (w.e.f. 28-9-1988).  
5. Subs. by s. 8, ibid., for sub-section (1A) (w.e.f. 28-9-1988). 

6 

                                                           
1[(4) 2[The Sponsor Bank] may, at any time, remove the Chairman from office: 
3[Provided that no such removal shall be made,— 

(a) if the Chairman is an officer of the Sponsor Bank, except after consultation with the National 

Bank; and 

(b) in any other case, except with the prior approval of the Central Government: 

Provided further that] no person shall be removed from his office, under this sub-section, unless he 

has been given an opportunity of showing cause against his removal.] 

(5)  The  Chairman  shall  receive  such  salary  and  allowances  and  be  governed  by  such  terms  and 
conditions of service as may be determined by the  4[the Sponsor Bank in consultation with the National 
Bank]. 

(6)  If  the  Chairman  is,  by  infirmity  or  otherwise,  rendered  incapable  of  carrying  out  his  duties                 
or  is  absent,  on  leave  or  otherwise,  in  circumstances  not  involving  the  vacation  of  office,  the                    
Central  Government  may  appoint  another  individual  to  act  as  the  Chairman  during  the  absence  of  the 
first-mentioned Chairman. 

12.  Disqualifications.—A  person  shall  be  disqualified  for  being  appointed  or,  as  the  case  may  be, 

nominated as, and for being, a director, if he— 

(a) is, or, at any time has been, adjudged insolvent or has suspended payment of his debt or has 

compounded with his creditors, or 

(b) is of unsound mind and stands so declared by a competent court, or 

(c)  is,  or  has  been,  convicted  of  an  offence  which,  in  the  opinion  of  the  Central  Government, 

involves moral turpitude. 

13. Vacation of the seat of directors.—(1) If a director— 

(a) becomes subject to any disqualification specified in section 12, or 

(b) is absent without leave of the Board for more than three consecutive meetings thereof, 

his seat shall thereupon become vacant. 

5[(2) A director may resign his office by giving notice thereof in writing to the authority by which he 
was nominated; and, on such resignation being accepted, the director shall be deemed to have vacated his 
office.] 

14.  Meetings  of  Board.—(1)  The  Board  of  directors  of  a  Regional  Rural  Bank  shall  meet  at  such 
time  and  place  and  shall  observe  such  rules  of  procedure  in regard  to  the  transaction  of  business  at  its 
meetings as may be prescribed. 

(2) The Chairman of the Regional Rural Bank shall preside over every meeting of the Board, and, in 
his  absence,  such  director  as  the  Chairman  may  generally,  or  in  relation  to  any  particular  meeting, 
authorise  in  this  behalf  shall  preside;  and,  in  the  absence  of  both  the  Chairman  and  the  director  so 
authorised, the directors present at the meeting shall elect one from among themselves to preside over the 
meeting. 

Explanation.—For the purposes of this sub-section, “absence” from a meeting means non-attendance 
for  any  reason  whatsoever  at  the  meeting,  or  any  part  of  the  meeting  during  which  any  business  is 
transacted. 

(3) All questions at a meeting of the Board shall be decided by a majority of the votes of the directors 
present and voting; and, in case of equality of votes, the person presiding shall have a second or casting 
vote. 

1. Subs. by Act 73 of 1976, s. 6, for sub-section (4) (w.e.f. 11-6-1976).  
2. Subs. by Act 1 of 1988, s. 8, for “The Central Government” (w.e.f. 28-9-1988). 
3. Subs. by s. 8, ibid., for “Provided that” (w.e.f. 28-9-1988).  
4. Subs. by s. 8, ibid., for “the Central Government” (w.e.f. 28-9-1988).  
5. Subs. by s. 9, ibid., for sub-section (2) (w.e.f. 28-9-1988).  

7 

                                                           
(4)  No  director  shall,  as  a  director,  take  part  in  the  discussion  of,  or  vote  on,  any  contract,  loan, 
arrangement or proposal entered into or to be entered into, by or on behalf of the Regional Rural Bank, if 
he is, in any way, whether directly or indirectly, interested in the contract, loan, arrangement or proposal 
and,  where  a  director  is  interested  in  any  such  matter,  he  shall,  at  the  earliest  possible  opportunity, 
disclose to the Board the nature of his interest in such contract, loan, arrangement or proposal, and where 
he does so, his presence at the meeting shall not count for the purpose of forming any quorum at the time 
of any such discussion or vote, and if he does vote, his vote shall be void: 

Provided that nothing contained in this sub-section shall apply to such director by reason only of his 

being— 

(i) a shareholder (other than a director) holding not more than two per cent. of the paid-up capital 
in  any  public  company  within  the  meaning  of  the  Companies  Act,  1956  (1  of  1956),  or  any 
corporation established by or under any law for the time being in force in India or any co-operative 
society, with which the Regional Rural Bank has entered into, or proposes to enter into, any contract, 
loan, arrangement or proposal; or 

(ii) a director of the Regional Rural Bank as such. 

15. Committees of Board.—The Board may constitute such committees, whether consisting wholly 
of directors or wholly of other persons or partly of directors and partly of other persons, as it may think 
fit, for such purposes as it may decide. 

16. Fees and allowances of directors and members of committees.—(1) Every director and every 
member  of  a  committee  (other  than  the  Chairman)  shall  be  paid  such  fees  and  allowances  as  may  be 
determined by the Central Government:  

Provided that no fees shall be paid to any director, or member of a committee, if he is an officer of the 
Central Government, State Government, the Reserve Bank, 1[National Bank,] Sponsor Bank or any other 
bank. 

(2) The allowances payable to a director or a member of a committee, who is an officer of the Central 
Government, State Government, Reserve Bank, 1[National Bank,] Sponsor Bank or any other bank, shall 
be  paid  by  the  Government  or  bank  by  which  such  officer  is  employed;  and  the  allowances  and  fees 
payable to any other director or member of a committee shall be payable by the concerned Regional Rural 
Bank. 

17.  Staff  of  Regional  Rural  banks.—(1)  A  Regional  Rural  Bank  may  appoint  such  number  of 
officers  and  other  employees  as  it  may  consider  necessary  or  desirable  2[in  such  manner  as  may  be 
prescribed] for the efficient performance of its functions and may determine the terms and conditions of 
their appointment and service: 

Provided that it shall be lawful for a Sponsor Bank, if requested so to do by a Regional Rural  Bank 
sponsored by it, to send, 3*** such number of officers or other employees on deputation to the Regional 
Rural Bank as may be necessary or desirable for the efficient performance of its functions: 

Provided further that the remuneration of officers and other employees appointed by a Regional Rural 
Bank  shall  be  such  as  may  be  determined  by  the  Central  Government,  and,  in  determining  such 
remuneration, the Central Government shall have due regard to the salary structure of the employees of 
the State Government and the local authorities of comparable level and status in the notified area. 

(2)  Notwithstanding  anything  contained  in  the  Industrial  Disputes  Act,  1947  (14  of  1947),  or  any 
other  law  for  the  time  being  in  force,  no  award,  judgment,  decree,  decision  or  order  of  any  industrial 
tribunal, court or other authority, made before the commencement of this Act, shall apply to the terms and 
conditions in relation to the persons appointed by a Regional Rural Bank. 

(3)  The  officers  and  other  employees  of  a  Regional  Rural  Bank  shall  exercise  such  powers  and 

perform such duties as may be entrusted or delegated to them by the Board. 

1. Ins. by Act 1 of 1988, s. 10 (w.e.f. 28-9-1988).  
2. Ins. by s. 11, ibid. (w.e.f. 28-9-1988). 
3. The words “, during the first five years of the functioning of a Regional Rural Bank,” omitted by s. 11, ibid. (w.e.f. 28-9-1988). 

8 

                                                           
CHAPTER IV 

BUSINESS OF A REGIONAL RURAL BANK 

18. Business which a Regional Rural Bank may transact.—(1) Every Regional Rural Bank shall 
carry  on  and  transact  the  business  of  banking  as  defined  in  clause  (b)  of  section  5  of  the  Banking 
Regulation  Act,  1949  (10  of  1949),  and  may  engage  in  one  or  more  forms  of  business  specified  in               
sub-section (1) of section 6 of that Act. 

(2)  Without  prejudice  to  the  generality  of  the  provisions  of  sub-section  (1),  every  Regional  Rural 

Bank may, in particular, undertake the following types of business, namely:— 

(a) the granting of loans and advances, particularly to small and marginal farmers and agricultural 
labourers,  whether  individually  or  in  groups,  and  to  co-operative  societies,  including  agricultural 
marketing  societies,  agricultural  processing  societies,  co-operative  farming  societies,  primary 
agricultural  credit  societies  or  farmers’  service  societies,  for  agricultural  purposes  or  agricultural 
operations or for other purposes connected therewith; 

(b) the granting of loans and advances, particularly to artisans, small entrepreneurs and persons of 
small means engaged in trade, commerce or industry or other productive activities, within the notified 
area in relation to the Regional Rural Bank. 

CHAPTER V 

ACCOUNTS AND AUDIT 

19.  Closure  of  accounts.—(1)  Every  Regional  Rural  Bank  shall  cause  its  books  to  be  closed  and 
balanced as on the 1[31st day of March] 2[or such other date in each year as the Central Government may, 
by  notification  in  the  Official  Gazette,  specify]  and  shall  appoint  with  the  approval  of  the  Central 
Government auditors for the audit of its accounts: 

3[Provided  that  with  a  view  to  facilitating  the  transition  from  one  period  of  accounting  to  another 
period  of  accounting  under  this  sub-section,  the  Central  Government  may,  by  order  published  in  the 
Official  Gazette,  make  such  provisions  as  it  considers  necessary  or  expedient  for  the  closing  and 
balancing of, or for other matters relating to, the books in respect of the concerned years.] 

(2) Every auditor of a Regional Rural Bank shall be a person who is qualified to act as an auditor of a 
company under section 226 of the Companies Act, 1956 (1 of 1956), and shall receive such remuneration 
as the Regional Rural Bank may fix with the approval of the Central Government. 

(3)  Every  auditor  shall  be  supplied  with  a  copy  of  the  annual  balance-sheet  and  profit  and  loss 
account of the Regional Rural Bank, and a list of all books kept by the Regional Rural Bank, and it shall 
be  the  duty  of  the  auditor  to  examine  the  balance-sheet  and  vouchers  relating  thereto,  and,  in  the 
performance of his duties, the auditor— 

(a) shall have, at all reasonable times, access to the books, accounts and other documents of the 

Regional Rural Bank; 

(b) may, at the expense of the Regional Rural Bank, employ accountants or other persons to assist 

him in investigating such accounts; and 

(c)  may,  in  relation to  such  accounts,  examine  the  Chairman  or  any  officer  or employee  of  the 

Regional Rural Bank. 

(4)  Every  auditor  of  a  Regional  Rural  Bank  shall  make  a  report  to  that  bank  upon  the  annual                   

balance-sheet and accounts and in every such report shall state,— 

(a)  whether,  in  his  opinion,  the  balance-sheet  is  a  full  and  fair  balance-sheet  containing  all 
necessary particulars and is properly drawn up so as to exhibit a true and fair view of the affairs of the 
Regional Rural Bank, and, in case he had called for any explanation or information, whether it has 
been given and whether it is satisfactory; 

1. Subs. by Act 14 of 2015, s. 7, for “31st day of December” (w.e.f. 4-2-2016).  
2. Subs. by Act 66 of 1988, s. 33, for “of each year” (w.e.f. 30-12-1988). 
3. Ins. by s. 33, ibid. (w.e.f. 30-12-1988). 

9 

                                                           
(b) whether or not, the transactions of the Regional Rural Bank, which have come to his notice, 

have been within the powers of that bank; 

(c) whether or not, the returns received from the offices and branches of the Regional Rural Bank 

have been found adequate for the purpose of his audit; 

(d)  whether  the  profit  and  loss  account  shows  a  true  balance  of  profit  or  loss  for  the  period 

covered by such accounts; and 

(e)  any  other  matter  which  he  considers  should  be  brought  to  the  notice  of  the  Regional  Rural 

Bank. 

20. Annual report to be furnished to the shareholders.—1[(1)] Every Regional Rural Bank shall, 
within  2[three  months  from  the  date  of  the  closure  of  its  accounting  year,  or  such  further  period,  not 
exceeding  three  months,  as  may  be  permitted  by  the Reserve  Bank],  send to  each  of its  shareholders a 
report as to its working and activities during the accounting year immediately preceding together with a 
copy of its balance-sheet, profit and loss account and the auditor’s report in relation to the accounts of the 
said accounting year. 

3[(2)  The  Central  Government  shall  cause  every  auditor’s  report  and  report  on  the  working  and 
activities of each Regional Rural Bank to be laid, as soon as may be after they are received, before each 
House of Parliament.] 

21. Disposal of profits.—After making provisions for bad and doubtful debts, depreciation in assets, 
contributions to staff and superannuation funds and all other matters for  which provision is, under law, 
necessary or which are usually provided for by banking companies, a Regional Rural Bank may, out of its 
net profits, declare a dividend. 

22.  Regional  Rural  Bank  to  be  deemed  to  be  a  co-operative  society  for  purpose  of  the                 

Income-tax  Act,  1961.—For  the  purpose  of  the  Income-tax  Act,  1961  (43  of  1961),  or  any  other 
enactment  for  the time  being  in  force relating  to  any  tax on income,  profits  or gains,  a  Regional  Rural 
Bank shall be deemed to be a co-operative society. 

23.  Interest-tax  not  payable.—Notwithstanding  anything  contained 

the 
Act, 1974 (45 of 1974), no Regional Rural Bank shall be liable to pay any tax under that Act. 

in 

Interest-tax                   

4[CHAPTER VA 

AMALGAMATION OF REGIONAL RURAL BANKS 

23A.  Amalgamation  of  Regional  Rural  Banks.—(1)  Notwithstanding  anything  contained  in  this 
Act,  if  the  Central  Government,  after  consultation  with  the  National  Bank,  the  concerned  State 
Government and the Sponsor Bank, is of the opinion that it is necessary in the public interest or in the 
interest  of  the  development  of  the  area  served  by  any  Regional  Rural  Bank  or  in  the  interest  of  the 
Regional Rural Banks themselves, that two or more Regional Rural Banks should be amalgamated, that 
Government may, by notification in the Official Gazette, provide for the amalgamation of such Regional 
Rural Banks (hereafter in this Chapter referred to as the transferor Regional Rural  Banks) into a single 
Regional  Rural  Bank  (hereafter  in  this  Chapter  referred  to  as the  transferee  Regional  Rural  Bank)  with 
such constitution, property, powers, rights, interests, authorities and privileges; and with such liabilities, 
duties and obligations, as may be specified in the notification. 

(2) Every notification issued under sub-section (1) shall indicate the date with effect from which the 

amalgamation shall become effective. 

1. S. 20 renumbered as sub-section (1) thereof by Act 81 of 1985, s. 11 (w.e.f. 1-5-1986). 
2. Subs. by Act 1 of 1988, s. 12, for “sixty days from the date of closure of its accounting year” (w.e.f. 28-9-1988).  
3.  Ins. by Act 81 of 1985, s. 11 (w.e.f. 1-5-1986).  
4. Ins. by Act 1 of 1988, s. 13 (w.e.f. 28-9-1988).  

10 

                                                           
(3) Every notification issued under sub-section (1) may also provide for all or any of the following 

matters, namely:— 

(a)  the  continuance  in  service  of  all  the  employees  of  the  transferor  Regional  Rural  Banks 
(excepting such of them as not being workmen with the meaning of the Industrial Disputes Act, 1947 
(14 of 1947) are specifically mentioned in the notification) in the transferee Regional Rural Bank at 
the same remuneration and on the same terms and conditions of service, which they were getting or, 
as the case may be, by which they were being governed, immediately before the date on which the 
amalgamation takes effect; 

(b)  notwithstanding  anything  contained  in  clause  (a),  where  any  of  the  employees  of  the 
transferor Regional Rural Banks, not being workmen within the meaning of the  Industrial Disputes 
Act, 1947 (14 of 1947) are specifically mentioned in the notification, or where any employee of the 
transferor Regional Rural Banks has by notice in writing given to the transferee Regional Rural Bank 
at  any  time  before  the  expiry  of  a  period  of  three  months  next  following  the  date  on  which  the 
amalgamation  takes  effect,  intimated  his  intention  of  not  becoming  an  employee  of  the  transferee 
Regional Rural Bank, the payment to such employee of compensation, if any, to which he is entitled 
under  the  Industrial  Disputes  Act,  1947,  and  such  gratuity,  provident  fund  and  other  retirement 
benefits  ordinarily  admissible  to  him  under  the  rules  or  authorisations  of  the  concerned  transferor 
Regional Rural Banks immediately before that date; 

(c) the other terms and conditions for the amalgamation of Regional Rural Banks; and 

(d)  the  continuance  by  or  against  the  transferee  Regional  Rural  Bank  of  any  pending  legal 
proceeding by or against any transferor Regional Rural Banks and such consequential, incidental and 
supplemental  provisions,  as  may,  in  the  opinion  of  the  Central  Government,  be  necessary  to  give 
effect to the amalgamation. 

(4) Every notification issued under sub-section (1) shall, as soon as may be after it has been made, be 

laid before each House of Parliament. 

23B.  Notification  under  section  23A  to  be  sufficient  notice  to  concerned  parties.—(1)  A 
notification issued under sub-section (1) of section 23A, shall constitute sufficient notice of the provisions 
thereof to all the parties concerned and shall be binding on the transferor Regional Rural Banks and the 
transferee Regional Rural Bank and to the depositors, creditors, employees and all other persons having 
dealings with such banks. 

(2)  Notwithstanding  anything  contained  in  the  Transfer  of  Property  Act,  1882  (4  of  1882)  or  the 
Registration Act, 1908 (16 of 1908), any notification issued under sub-section (1) of section 23A shall be 
sufficient conveyance, in accordance with the provisions of the notification, of the business, properties, 
assets and liabilities, rights, interests, powers, privileges, benefits and obligations of whatever nature of 
the transferor Regional Rural Banks to the transferee Regional Rural Bank. 

(3) On and from the date on which the amalgamation takes effect under section 23A, any reference to 
the transferor Regional Rural Banks in any agreement, conveyance, assurance, power of attorney or any 
other document of whatsoever nature, shall be deemed to be a reference to the transferee Regional Rural 
Bank  and  the  rights  and  obligations  of  the  transferor  Regional  Rural  Banks  shall  be  deemed  to  be  the 
rights  and  obligations  of  the  transferee  Regional  Rural  Bank  to  the  extent  specified  in  the  said 
amalgamation. 

23C. Cessation of business of transferor Regional Rural Banks.—On and from the date on which 
the amalgamation takes effect under section 23A, the transferor Regional Rural Banks shall cease to carry 
on  business,  including  that  of  making  of  any  payment  to  any  depositors  or  discharge  any  liability  or 
obligation  to  the  creditors  except  to  the  extent  as  may  be  necessary  for  the  implementation  of  the 
provisions of the said amalgamation. 

23D. Liquidation of Regional Rural Banks.—Where a notification is issued for the amalgamation 
of Regional Rural Banks under sub-section (1) of section 23A, the Central Government may, by a further 
notification in the  Official Gazette,  direct  that  on  such  date,  as  may  be  specified  therein,  the  transferor 
Regional Rural Banks, which by reason of amalgamation will cease to function, shall stand dissolved and 
such direction shall take effect notwithstanding anything to the contrary contained in section 26.] 

11 

CHAPTER VI 

MISCELLANEOUS 

24.  Power  of  Central  Government  to  give  directions.—(1)  A  Regional  Rural  Bank  shall,  in  the 
discharge  of its functions, be  guided  by  such  directions  in  regard  to  matters  of  policy  involving  public 
interest as the Central Government may, after consultation with the Reserve Bank, give. 

(2)  If  any  question  arises  as  to  whether  any  such  direction  relates  to  a  matter  of  policy  involving 

public interest, the decision of the Central Government thereon shall be final. 

1[24A.  Inspection,  audit  and  scrutiny  by  the  Sponsor  Bank.—Notwithstanding  anything               

contained in section 19 and without prejudice to the provisions of section 35 of the Banking Regulation 
Act, 1949 (10 of 1949), the Sponsor Bank shall, from time to time, monitor the progress of the Regional 
Rural Banks sponsored by it and cause inspection, internal audit and scrutiny to be made by one or more 
of its officers and suggest corrective measures to be taken by such Regional Rural Bank.] 

25.  Obligations  as  to  fidelity  and  secrecy.—(1)  A  Regional  Rural  Bank  shall  observe,  except  as 
otherwise required by law, the practices and usages customary among bankers and, in particular, it shall 
not  divulge  any  information  relating  to,  or  to  the  affairs  of,  its  constituents  except  in  circumstances  in 
which  it  is,  in  accordance  with  the  law  or  practice  and  usage  customary  among  bankers,  necessary  or 
appropriate for the Regional Rural Bank to divulge. 

(2) Every director, member of a committee or auditor, officer or other employee of a Regional Rural 
Bank shall, before entering upon his duties, make a declaration of fidelity and secrecy in the form set out 
in the Schedule to this Act; 

2[(3) Nothing contained in this section shall apply to the credit information disclosed under the Credit 

Information Companies (Regulation) Act, 2005 (30 of 2005).] 

26. Bar to liquidation of Regional Rural Bank.—No provision of law relating to the winding up of 
companies  shall  apply  to  a  Regional  Rural  Bank  and  a  Regional  Rural  Bank  shall  not  be  placed  in 
liquidation save by order of the Central Government and in such manner as it may direct. 

27. Defects in appointment or constitution not to invalidate acts or proceedings.—(1) No act of a 
Chairman, acting in good faith, shall be invalid merely by reason of any defect in his appointment or in 
the procedure. 

(2)  No  act or  proceeding  of  any  Board  of  directors  or  of any  committee  of  a  Regional  Rural  Bank 
shall be invalid merely on the ground of the existence of any vacancy in, or defect in the constitution of, 
such Board or committee, as the case may be. 

(3) Acts done by a person, acting in good faith, as a director or member of a committee of a Regional 
Rural Bank shall be valid, notwithstanding that it may afterwards be discovered that his appointment was 
invalid by reason of any defect or disqualification or had terminated by virtue of any provision contained 
in any law for the time being in force: 

Provided that nothing in this section shall be deemed to give validity to any act done by a director or a 
member  of  any  committee  of  a  Regional  Rural  Bank  after  his  appointment  has  been  shown  to  the 
Regional Rural Bank to be invalid or to have terminated. 

28. Indemnity of directors, etc.—(1) A director or a  member of a committee of a Regional Rural 
Bank shall not be responsible for any loss or expense caused to such bank by insufficiency or deficiency 
of the value of, or title to, any property or security acquired or taken on behalf of a Regional Rural Bank 
or by the insolvency or wrongful act of any customer or debtor or anything done in, or in relation to, the 
execution of the duties of his office, unless such loss, expense, insufficiency or deficiency was due to any 
wilful act or default on the part of such director or member. 

1. Ins. by Act 1 of 1988, s. 14 (w.e.f. 28-9-1988).  
2. Ins. by Act 30 of 2005, s. 2 and the Schedule (w.e.f. 23-6-2005). 

12 

                                                           
(2)  The  Chairman  of  a  Regional  Rural  Bank  and  every  officer  of  the  Central  Government  or  State 
Government or  an officer of the Reserve Bank  1[or the National Bank] or the Sponsor Bank and every 
officer or other employee of a Regional Rural Bank shall be indemnified by such bank against all losses 
and expenses incurred by him in, or in relation to, the discharge of his duties except such as have been 
caused by his own wilful act or default. 

29. Power to make rules.—(1) The Central Government may, after consultation with the 2[National 
Bank]  and  the  Sponsor  Bank,  by  notification  in  the  Official  Gazette,  make  rules  for  carrying  out  the 
provisions of this Act. 

(2)  In  particular,  and  without  prejudice  to  the  generality  of  the  foregoing  power,  such  rules  may 

provide for all or any of the following matters, namely:— 

(a) the manner in which the additional number of members of the Board may be filled in, under 

sub-section (2) of section 9; 

(b) the time and place at which the Board of directors of a Regional Rural Bank shall meet and 
the rules of procedure which shall be observed by the Board in regard to the transaction of business at 
its meetings, under sub-section (1) of section 14; 

3[(ba) the manner in which the officers and other employees of the Regional Rural Banks shall be 

appointed;] 

(c) any other matter which is required to be, or may be, prescribed. 

(3) Every rule made by the Central Government under this Act shall be laid, as soon as may be after it 
is made, before each House of Parliament, while it is in session, for a total period of thirty days which 
may be comprised in one session or in two or more successive sessions, and if, before the expiry of the 
session  immediately  following  the  session  or  the  successive  sessions  aforesaid,  both  Houses  agree  in 
making any modification in the rule or both Houses agree that the rule should not be made, the rule shall 
thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that 
any such modification or annulment shall be without prejudice to the validity of anything previously done 
under that rule. 

30. Power to make regulations.—4[(1)] The Board of directors of a Regional Rural Bank may, after 
consultation  with  the  Sponsor  Bank  and  the  5[National  Bank],  and  with  the  previous  sanction  of  the 
Central Government, 6[by notification in the Official Gazette,] make regulations, not inconsistent with the 
provisions  of  this  Act  and  the  rules  made  thereunder,  to  provide  for  all  matters  for  which  provision  is 
necessary or expedient for the purpose of giving effect to the provisions of this Act. 

7[(2)  Every  regulation  shall,  as  soon  as  may  be  after  it  is  made  under  this  Act  by  the  Board  of 
directors, be forwarded to the Central Government and that Government shall cause a copy of the same to 
be laid before each House of Parliament, while it is in session, for a total period of thirty days which may 
be comprised in one session or in two or more successive sessions, and if, before the expiry of the session 
immediately following the session or the successive sessions aforesaid, both Houses agree in making any 
modification in the regulation or both Houses agree that the regulation should not be made, the regulation 
shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, 
that any such modification or annulment shall be without prejudice to the validity of anything previously 
done under that regulation.] 

1. Ins. by Act 1 of 1988, s. 15 (w.e.f. 28-9-1988). 
2. Subs. by s. 16, ibid., for “Reserve Bank” (w.e.f. 28-9-1988).  
3. Ins. by s. 16, ibid. (w.e.f. 28-9-1988). 
4. Section 30 renumbered as sub-section (1) thereof by Act 1 of 1984, s. 70 (w.e.f. 15-2-1984). 
5. Subs. by Act 1 of 1988, s. 17, for “Reserve Bank” (w.e.f. 28-9-1988). 
6. Ins. by Act 66 of 1988, s. 34 (w.e.f. 30-12-1988).  
7. Ins. by Act 1 of 1984, s. 70 (w.e.f. 15-2-1984). 

13 

                                                           
31. Removal of difficulties.—If any difficulty arises in giving effect to the provisions of this Act, the 
Central Government may make such order, not inconsistent with the provisions of this Act, as may appear 
to it to be necessary for the purpose of removing the difficulty: 

Provided  that  no  such  order  shall  be  made  after  the  expiry  of  a  period  of  five  years  from  the 

commencement of this Act. 

32.  Act  to  override  the  provisions  of  other  laws.—The  provisions  of  this  Act  shall  have  effect 
notwithstanding anything to the contrary contained in any other law for the time being in force or in any 
contract, express or implied, or in any instrument having effect by virtue of any law other than this Act, 
and notwithstanding any custom or usage to the contrary.  

CHAPTER  VII  [Amendments  of  certain  enactments.]  Rep.  by  the  Repealing  and  Amending                         

Act, 1988 (19 of 1988), s. 2 and the First Schedule (w.e.f. 31-3-1988). 

14 

THE SCHEDULE 

[See section 25 (2)] 

I,....................,  do  hereby  declare  that  I  will  faithfully,  truly  and  to  the  best  of  my  skill  and  ability 
execute and perform the duties required of me as a director, member of a committee, officer, employee or 
auditor  (as  the  case  may  be)  of  the  Regional  Rural  Bank  and  which  properly  relate  to  any  office  or 
position in the said Bank held by me. 

I further declare that I will not communicate or allow to be communicated to any person not legally 
entitled thereto any information relating to the affairs of the Regional Rural Bank or to the affairs of any 
person having any dealings with the Regional Rural Bank, nor will I allow any such person to inspect or 
have access to, any books or documents belonging to, or in the possession of the Regional Rural Bank 
and  relating  to  the  business  of  the  Regional  Rural  Bank,  or  to  the  business  of  any  person  having  any 
dealings with the Regional Rural Bank. 

Signature. 

Signed before me. 

Dated 

15 

 
